Bank Reconciliation Statement

maintainance of the firm’s. The firm’s cash book for July which Kamlesh has just finished entering and balancing for the month is shown in exhibit . Help Kamlesh to prepare the bank reconciliation statement. Note : the cash column is omitted ).

A copy of firm’s bank statement dated July , is also illustrated in exhibiy . The numerical difference between the two is Rs. . .

( Bank statement Rs. . – Cash book Rs. .

). Aqua Products – Cash Book Dr. Cr. Receipts Bank Payments Bank July Balance b/d .

ü July Aditya 004450 . ü July Kanishk Enterprises . ü July Verma & Co. 004451 .

July Rampaul and Sons . ü July Gytri & Co. 004452 . ü July Sarin Bros .

July Mehta Ltd. 004453 . July Subash & Co. .

ü July Kaushik 004454 . ü July Kriosk Ltd. 004455 . ü July Insurance premium .

ü (SO) July Balance c/d . , . , . July Balance b/d .

Exhibit- Rahuvansh Wholesale Limited Bank Reconciliation Statement as at October , (As in practice) Balance at bank as per Cash book Add : Unpresented cheques by Oct. , (i) Samprada Trading Company (ii) Kanishk Partnership (iii) Parcha Limited Less : Cheques deposited but not cleared by Oct. , Balance at bank as per bank statement Start with the cash book balance updated from the bank statement Add cheques that have been issued, but which are not the bank statement Deduct any amounts paid in but which are not on the bank statement This should agree with the final balance on the bank statement Bank Statement Account Aqual Products Co. Account Number 79014456 Ledger No.

July , Details Debit Credit Balance July Balance . Cr. ü July Cheques . ü .

July 004452 . ü . Cr. July Subash & Co.

(DD) . ü . Cr. July Cheques .

Cr. July Insurance Premium . ü . Cr.

July 004454 . ü . Cr. July Bank charges .

. Cr. July Ruchita Limited . .

Cr. Exhibit Solution Step : Tick off the items in both cash book and bank statement ( as shown in Exhibit ). Step : Updating the cash book from the bank statement . The unticked items on the bank statement indicate items that have not yet been entered in Aqua Products Co.’s cash book.

These are : (i) Receipt on July by Ruchita Limited amounting to Rs. . (ii) Bank charges debited by bank on July amounting to Rs. .

These items needs to be entered in the cash book to up date it (refer exhibit – The new entries are shown in darker type). Aqua Products Cash Book (Extract) Dr. Cr. Receipts Bank Payments Bank July Balance b/d .

July Bank charges . July Ruchita Limited . Jul. Balance c/d .

. . Aug. Balance b/d .

Exhibit Step : Balance the cash book bank columns to produce an updated balance. As shown in exhibit , the balance of the bank column stands at Rs. . .

But then a difference is Rs. . (i.e. Rs.

. – . ) still exists. Step : Identify the remaining unticked items from the cash book.

These are . Receipts on July from Sarin Bros . . Payments made on July to Verma & Co.

. ( Cheque No. 004457 ) . Payments made on July to Mehta Ltd.

. ( Cheque No. 004453 ) These above three items will appear in next month’s bank statement as these are due to time gap. These are the items which will appear in the bank reconciliation statement.

Aqua Products Co. Bank Reconciliation Statement as on July , Balance at bank as per cash book . Add Unpresented cheques Verma and Co. .

Less Outstanding lodgement . Balance at bank as per bank statement . Do it Yourself You are a trainee accountant for Kamraj Limited, a small printing company. One of your tasks is to enter transactions in the company’s cash book, check the entries on receipt of the bank statement, update the cash book and make any amendments as necessary.

You are then asked to prepare a bank reconciliation statement at the end of the month. The company’s cash book (showing the bank money columns only) and the bank statement are given on page no. (refer exhibit ). You are required to : compare the cash book with the bank statement as on August , (refer exhibit on page no.

). Make the entries necessary to update the cash book. Calculate the adjusted bank balance as per cash book. Kamraj Ltd.

– Cash Book Bank Bank Aug. Balance b/d , Aug. XYZ Insurance Aug. Kapoor & Co.

Aug. Nanda & Co. 200100 Aug. V.

S. Rao Aug. Daily Ltd. 200101 Aug.

S. K. Alok Aug. Garage Charges 200102 Aug.

E. Norries Ltd. Aug. M.D.

Finance Aug. Samaira Ltd. Aug. Hill Bros 200103 Aug.

Harsh Vardan Aug. Akshey Ltd. 200104 Aug. IBP Partners Aug.

Kalakriti Ltd. Aug. Balance c/d , , , Sep. Balance b/d , Exhibit ABC STATEMENT , Mall Road, Gurgaon.

Account Kamraj Limited Account No. 78300582 August , Debit Credit Balance Aug. Balance , CR Aug. Cheques , CR Aug.

XYZ Insurance (DD) , CR Aug. 200101 , CR Aug. V. S.

Rao , CR Aug. Cheques , CR Aug. 200102 , CR Aug. Cheques , CR Aug.

N. P. Finance (SO) , CR Aug. Cheques , CR Aug.

Kalakriti Ltd. , CR Aug. Tony Bros , CR Aug. Bank charges , CR Aug.

Surya Finance (SO) , , CR Exhibit Name of business.......... Bank Reconciliation Statement as at .......... Balance at bank as per cash book .......... Add : unpresented cheque(s) ..........

Less : outstanding lodgement(s) not yet entered on bank statement Balance at bank as per bank statement .......... Note : show the working clearly and step-wise Test your Understanding - III State whether each of the following statements is True or False Passbook is the statement of account of the customer maintained by the bank. A business firm periodically prepares a bank reconciliation statement to reconcile the bank balance as per the cash book with the passbook as these two show different balances for various reasons. Cheques issued but not presented for payment will reduce the balance as per the passbook.

Cheques deposited but not collected will result in increasing the balance of the cash book when compared to passbook. Overdraft as per the passbook is less than the overdraft as per cash book when there are cheques deposited but not collected by the banker. . The debit balance of the bank account as per the cash book should be equal to the credit balance of the account of the business in the books of the bank.

. Favourable bank balance as per the cash book will be less than the bank passbook balance when there are unpresented cheques for payment. . Direct collections received by the bank on behalf of the customers would increase the balance as per the bank passbook when compared to the balance as per the cash book.

. When payments made by the bank as per the standing instructions of the customer, the balance in the passbook will be more when compared to the cash book. Key Terms Introduced in the Chapter Cash book and Passbook Summary with Reference to Learning Objectives Bank Reconciliation Statement : A statement prepared to reconcile the bank balance as per cash book with the balance as per passbook or bank statement, by showing the items of difference between the two accounts. Causes of difference : – timing of recoding the transaction.

– error made by business or by the bank. Correct cash balance: It may happens that some of the receipts or payments are missing from either of the books and errors, if any, need to be rectified. This arise the need to look at the entries/errors recorded in both statements and other information available and compute the correct cash balance before reconciling the statements. Questions for Practice Short Answers State the need for the preparation of bank reconciliation statement?

What is a bank overdraft? Briefly explain the statement ‘wrongly debited by the bank’ with the help of an example. State the causes of difference occurred due to time lag. Briefly explain the term ‘favourable balance as per cash book’ .

Enumerate the steps to ascertain the correct cash book balance. Long Answers What is a bank reconciliation statement. Why is it prepared? Explain the reasons where the balance shown by the bank passbook does not agree with the balance as shown by the bank column of the cash book.

Explain the process of preparing bank reconciliation statement with amended cash balance. Numerical Questions Favourable balance of cash book and passbook – From the following particulars, prepare a, bank reconciliation statement as at March , . (i) Balance as per cash book Rs. , (ii) Cheque issued but not presented for payment Rs.

, (iii) Cheque deposited but not collected upto March , Rs. (iv) Bank charges debited by bank Rs. ( Ans : Balance as per passbook Rs. , ) On March the cash book showed a balance of Rs.

, as cash at bank, but the bank passbook made up to same date showed that cheques for Rs. , Rs. and Rs. respectively had not presented for payment, Also, cheque amounting to Rs.

, deposited into the account had not been credited. Prepare a bank reconciliation statement. ( Ans : Balance as per passbook Rs. , ).

The cash book shows a bank balance of Rs. , . On comparing the cash book with passbook the following discrepancies were noted : (a) Cheque deposited in bank but not credited Rs. , (b) Cheque issued but not yet present for payment Rs.

, (c) Insurance premium paid by the bank Rs. , (d) Bank interest credit by the bank Rs. (e) Bank charges Rs. (d) Directly deposited by a customer Rs.

, ( Ans: Balance as per passbook Rs. , ). Bank balance of Rs. , showed by the cash book of Atul on December , .

It was found that three cheques of Rs. , , Rs. , and Rs. , deposited during the month of December were not credited in the passbook till January , .